An incentive-based mechanism for coordinating grid-oriented control: The unIT-e² KOALA

To counteract an overload of the low-voltage grids due to the ramp-up of new electrical consumers, two specifications of the Federal Network Agency (BNetzA) to specify § 14a EnWG came into force on 1 January 2024. The regulations, which are mandatory for operators of controllable loads with a power consumption of more than 4.2 kW and operators of low-voltage grids, stipulate that grid operators can reduce the power consumption of controllable loads as a last resort by means of grid-oriented control interventions to keep the grid stable. The control interventions are to be carried out to the extent necessary without a time-related restriction, but a minimum grid-relevant power consumption of 4.2 kW per controllable load must always be ensured.

However, at least in addition to this purely emergency measure, Union law fundamentally requires the use of non-discriminatory market-based procedures for congestion management. These should make it possible to achieve load shifting via market incentives to give connection users more freedom, increase planning security for other use cases and dispel the concerns of critics with regard to loss of comfort. However, a concrete formulation of § 14c EnWG, for example, is still pending. From the unIT-e² research project (FKZ: 01MV21UN11), we therefore want to present a concept that coordinates grid-oriented control interventions in a cost-efficient manner and compensates for the known weaknesses of local flexibility markets as far as possible.

The unIT-e² KOALA concept is intended as an optional supplement to the BNetzA’s provisions on § 14a EnWG and coordinates the use of flexibility in the event of (forecast) congestion on the basis of short-term capacity auctions. The auctions enable market participants to express a willingness to pay for available capacity based on their direct opportunity costs. This creates a scarcity price similar to dynamic grid charges and the capacity restrictions can, for example, be distributed or allocated in a grid line in line with demand. This also explains the project acronym: “Coordination and allocation algorithm for flexibility” (German: KOALA). The reduction in the grid fee for participants and the unconditional power limit of 4.2 kW for individual controllable loads are taken from the BNetzA specifications, so that a certain minimum power is guaranteed even without participation in the auction. Figure 1 shows how the supply of available grid capacity (vertical line) in relation to price-elastic demand (diagonal line) affects the resulting scarcity price. The price curve also shows the incentive for participants to shift their power consumption to times when there is no congestion. Auction proceeds can be distributed among all participants as a bonus at the end of a settlement period to create an additional financial incentive to participate.

In the unIT-e² vision, commercial aggregators take over auction participation for their customers. Since these players are already aware of important boundary conditions such as the planned departure time and the desired destination SOC, they can calculate a willingness to pay in excess from this data and communicate it to the KOALA. At the same time, they are subject to market competition and thus a natural efficiency requirement, so that they have an interest in only bidding for capacity in line with demand.

Figure 1: Price signal depending on the current demand for available grid capacities.

In terms of the time dimension, the concept is based on two core elements: Firstly, a non-binding congestion warning on the day before the forecast congestion to give participants the opportunity to reschedule their power purchase early. Secondly, auction periods shortly before real time (e.g. t0-15 min) to minimize forecast uncertainties and prevent participants from having to commit to a bid prematurely, which in turn would limit their flexibility. Despite the short lead time, however, it is intended to be a preventive model for congestion management, as operators are given the opportunity to adjust their output on their own responsibility instead of having to implement an ad hoc control signal based on their actual power consumption.

The KOALA concept is legally feasible according to a rough examination by the project partners of the Stiftung Umweltenergierecht. It is not apparent that the concept conflicts with the existing European or national legal framework. In particular, it is fully compatible with grid-oriented control in accordance with the provisions of § 14a EnWG of the Federal Network Agency and has a normative point of reference with the regulations on the procurement of flexibility services in § 14c EnWG.

By introducing such a coordination mechanism, we expect various added values compared to the status quo: On the user side, the mechanism increases personal responsibility, offers targeted financial incentives for load shifting and enables to assert short-term opportunity. From the grid operator’s perspective, the auction mechanism can serve as coordination function for the use of flexibility and represent a cost indicator for insufficient grid expansion. This value could also be used when it comes to interpreting the obligation to expand the grid in line with demand. Furthermore, the market mechanism allows participants to be optimized according to economic criteria without creating incentives for strategic bidding, as is the case with conventional flexibility markets. The fact that participants cannot hope to receive remuneration in the event of congestion means that there are no incentives to provoke congestion through bidding behavior on the spot markets in the first place.